NORDSON CORP (NDSN Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Launched the Ascend strategy in 2021, focusing on customers, innovation, diversified geographic and end market exposures, and high recurring revenue through aftermarket parts and consumables.
• Completed the Atrium acquisition in September 2024, which expanded fluid components addressable market and added recurring revenue streams. Atrium was a solid contributor to fourth quarter revenue.
• Fourth quarter 2024 sales were $744 million, up 4% compared to the prior year's fourth quarter. Adjusted operating profit was $205 million, and EBITDA was $241 million (32% of sales).
• Full year 2024: Adjusted operating profit was $713 million (27% of sales), comparable to the prior year. EBITDA increased 4% to a record $849 million (32% of sales). Strong cash flow, with $492 million in free cash flow, and increased dividend by 15%.

Segment Performance

• Industrial Precision Solutions: Fourth quarter sales were $392 million, down 3% year-over-year. Organically, IPS decreased 5% in the quarter, with the AirAg acquisition adding 1% and currency providing a favorable impact of another 1%. EBITDA for the quarter was $143 million, representing 37% of sales. For the full year, IPS organic sales were flat with the prior year.
• Medical and Fluid Solutions: Fourth quarter sales of $200 million increased 19% compared to the prior year's fourth quarter. This increase was primarily driven by the Atrion acquisition and a minor currency benefit, offset by a decrease in organic sales volume of 3% or $5 million. Fourth quarter EBITDA was $72 million, 36% of sales.
• Advanced Technology Solutions: Fourth quarter sales of $152 million increased 5% compared to the prior year's fourth quarter. This change included an increase in organic sales volume of 4%, as well as a small currency benefit. Fourth quarter EBITDA was $41 million, 27% of sales.
• Full Year 2024: Record sales of $2.7 billion and record EBITDA dollars of $849 million (32% of sales). GAAP net income totaled $122 million or $2.12 per diluted share, while adjusted earnings per share excluding nonrecurring acquisition and restructuring-related expenses totaled $2.78 per share, a 3% increase over the prior year.

Guidance

• Fiscal 2025: Sales guidance: 2% to 7% above fiscal 2024 sales. Full year 2025 adjusted earnings per share range: neutral to 8% growth. Estimated effective tax rate: 19% to 21%. Capital expenditures: $50 to $60 million. Interest expense: $90 to $100 million.
• First Quarter Fiscal 2025: Sales forecast: $615 to $655 million. Adjusted earnings per share: $1.95 to $2.15. Anticipates modest start due to seasonality and timing of Chinese New Year.

Risks

• End market cycles and macro conditions affecting organic growth in segments like Industrial Precision Solutions and Advanced Technology Solutions.
• Uncertainty in the global macro environment impacting customer spending, leading to cautious inventory purchase patterns in some product lines.
• Near-term weakness in selected product lines such as industrial coatings and polymer processing, with reduced capital investments and backlog levels.
• Inventory purchase patterns in medical interventional solutions, impacting growth in the Medical and Fluid Solutions segment.

Question and Answer

• Q: Mike Halloran from Baird asks about growth outlook and end market cadence. A: Sundaram Nagarajan and Daniel Hopgood discuss end market conditions in Industrial Precision Solutions, Medical and Fluid Solutions, and Advanced Technology Solutions, and how guidance is built around seasonality and current market views.
• Q: Ben from Jefferies asks about backlog excluding Atrium and Chinese New Year impact. A: Daniel Hopgood responds that Atrium added about $35 million to the backlog, and Chinese New Year has a $10 to $20 million sales impact, pushing some sales to the second quarter.
• Q: Christopher Glynn asks about ATS EBITDA margins and Atrium integration. A: Sundaram Nagarajan and Daniel Hopgood discuss ATS's 27% EBITDA margin and Atrium's integration progress, with EBITDA margins expected to improve towards Nordson-like levels.
• Q: Matt Summerville asks about monthly order cadence and organic growth in segments. A: Daniel Hopgood and Sundaram Nagarajan talk about order patterns supporting guidance, with organic growth expectations and seasonality considerations.
• Q: Jeff Hammond asks about backlog normalization and interventional destock. A: Daniel Hopgood and Sundaram Nagarajan address backlog normalization in large system businesses and ongoing destocking in medical interventional solutions.
• Q: Andrew Buscaglia asks about EPS growth and margin expansion. A: Daniel Hopgood and Sundaram Nagarajan discuss margin expansion through MBS Next growth framework, synergies from acquisitions, and tax rate improvements.
• Q: Walt Liptak asks about orders, recovery, and ATS margins. A: Daniel Hopgood and Sundaram Nagarajan discuss market hesitancy, impact of macro environment, and ATS's prospects for growth and margin improvement in normalized markets.